US tech stocks were poised to rebound from their worst week since April as investors looked beyond Joe Biden ending his presidential reelection campaign and mainly focused on earnings, reports Bloomberg.
Market reaction to Biden’s decision to quit the race and endorse Kamala Harris has so far been fairly muted, with a Bloomberg gauge of dollar strength slipping 0.1 per cent, while the 10-year Treasury yield dropped two basis points. Democrats face the task of uniting around a new nominee just weeks before their convention, and must rapidly make up ground against Republican frontrunner Donald Trump.
Investors have been wagering on Trump’s return to the White House for weeks, trimming holdings of long-term US bonds and buying Bitcoin, among other things. Now, they’re considering whether the ‘Trump Trade’ is still on. The uncertainty may translate into volatility for markets, though for now, much attention is on earnings and the outlook for monetary policy.
“We are more focused on the cadence of the business cycle than on the outcome of the election,” said Morgan Stanley strategist Michael Wilson. “While markets have been digesting the rising odds of a Trump win, cyclical upside from here will likely be dependent on growth.”
Nasdaq 100 futures contracts jumped 1.0 per cent, signaling a partial recovery from last week’s 4 per cent slump. S&P futures climbed 0.6 per cent. Europe’s Stoxx 600 index rose more than 1.0 per cent, snapping a five-day losing streak.
Investors have their hands full dealing with major earnings this week. Tesla Inc and Alphabet Inc will be the first of the ‘Magnificent Seven’ to report on Tuesday. Analysts will likely press Elon Musk’s electric-vehicle giant on the progress of its plans for robotaxis. And investors will delve into the details of Google’s parent revenue boost from artificial intelligence.
“It’s a good reporting season so far, but you have to wonder what are the catalysts for the market to keep on rising further?” said Andrew Pease, global head of investment strategy at Russell Investments Ltd. “A lot of the hope is that we get this rotation away from the Mag Seven to the S&P 493 and the equal-weighted index starts to catch up with the cap-weighted. Asymmetry is still the watchword right now.”
In US premarket trading, Verizon Communications Inc slid after reporting operating revenue that missed analysts’ estimates as fewer people upgraded wireless equipment. CrowdStrike Holdings Inc fell as much as 4.9 per cent as Guggenheim Securities cut the rating on the stock to neutral from buy, after a faulty software update from the cybersecurity firm affected 8.5 million devices that rely on Microsoft Corp’s Windows operating system.
Companies in Europe have made a positive start to the reporting season, according to strategists at Morgan Stanley said, with 29 per cent beating profit expectations. Ryanair Holdings Plc, however, failed to boost that track record Monday, falling as much as 16 per cent after the Irish budget carrier cut its outlook for ticket prices in the crucial summer travel period. Rivals EasyJet Plc and IAG SA also fell.
In Asia, stocks continued to be dragged lower by a weak tech sector. Chinese bonds were a highlight, gaining after the central bank cut a policy interest rate. The country’s stocks fell, as investors continued to express disappointment at a lack of strong stimulus measures from a recent major Communist Party meeting.
Elsewhere this week, traders will be focused on economic activity data in Europe, US second-quarter growth and a Bank of Canada rate decision.
